Iceland’s economy weakened in the fourth quarter of 2025, with gross domestic product (GDP) shrinking by 0.8% quarter-over-quarter, according to data updated on 27 February 2026. The decline deepened from the third quarter of 2025, when GDP had already slipped by 0.2% compared with the previous quarter.
The figures, based on a quarter-over-quarter comparison, show that the latest “actual” reading for Q4 2025 reflects a sharper contraction than the “previous” reading for Q3 2025, which measured the change from the second to the third quarter. The back-to-back declines indicate that Iceland entered a period of worsening economic momentum at the end of 2025, as output fell more rapidly in the final quarter of the year.
